Sharpe Ratio Formula - Finance
Learn the sharpe ratio formula with examples, step-by-step guide, and calculator tools. Calculate the risk-adjusted return of an investment portfolio to compare performance across different risk levels
The sharpe ratio formula is a fundamental concept in finance. Calculate the risk-adjusted return of an investment portfolio to compare performance across different risk levels. This page provides a comprehensive guide with worked examples and practical applications.
The Formula
Variables
Step-by-Step Guide
- 1
Step 1: Gather your data values
- 2
Step 2: Apply the formula
- 3
Step 3: Perform the calculations
- 4
Step 4: Interpret the result
Examples
Example 1
Example 1: [0.12,0.03,0.15] → Sharpe Ratio = (12% portfolio return - 3% risk-free rate) / 15% portfolio volatility = 0.6
Example 2
Example 2: 0.6
Frequently Asked Questions
What is the sharpe ratio formula?
Calculate the risk-adjusted return of an investment portfolio to compare performance across different risk levels
How do I calculate sharpe ratio formula?
Use the formula: S = \frac{R_p - R_f}{\sigma_p}. Follow the steps provided above.
What tools can help with sharpe ratio formula?
We provide online calculators: npv-calculator, irr-calculator, profit-margin-calculator